Bitcoin (BTC) is priced close to $ 16,000 after reaching $ 15,960 on Binance. After the rally of the dominant cryptocurrency, analysts are now looking at Ether (ETH). The native token of the Ethereum blockchain has seen increased momentum in the past week. After underperforming BTC in October, the likelihood of a new ETH rally is gradually increasing.
There are two main reasons analysts believe Ether will perform well in the short term. First, after the Ethereum 2.0 announcement, the capital in the Bitcoin market could move to ETH. Second, ETH recently tested a critical level of resistance, which increases the chances of a wider rally. Given that the altcoin market has historically recovered from an initial Bitcoin boom, the timing of an ETH uptrend is ideal.
Capital for the switch from Bitcoin to Ether?
Since October 21, the price of Bitcoin has increased by around 33%. It broke out of major areas of resistance one at a time, starting at $ 13,000. When Bitcoin initially exceeded $ 13,000, large whale piles formed at that level. It showed that whales began to actively accumulate BTC, which resulted in $ 13,000 becoming a support zone.
After reclaiming $ 13,000 as a support level for the first time since July 2019, BTC continued to climb. Over time, $ 13,500 was confirmed as the next level of support, followed by $ 14,000 and finally $ 15,000. As Bitcoin rose, analysts said it was negative for altcoins as it started sucking most of the volume from the crypto market. As a result, many altcoins fell against Bitcoin and the US dollar as Bitcoin rebounded.
Bitcoin’s overwhelming strength from October through early November took a heavy toll on the altcoin market, but Bitcoin’s price action has shown that bullish market sentiment regarding crypto has returned. A clean breakout above $ 15,000 could result in more capital pouring into riskier games, including ether.
Denis Vinokourov, head of research at Crypto Exchange and broker Bequant, told Cointelegraph that Bitcoin’s capital could end up in the ether and Ethereum ecosystem. In the last 48 hours, the decentralized financial market has developed particularly strongly after stagnating since the beginning of September.
DeFi tokens like Yearn.finance’s YFI and Uniswap’s UNI rose nearly 30% after Ether’s sudden rebound. Hence, Vinokourov stressed that the broader Ethereum ecosystem could soon benefit from Bitcoin’s rally:
“All eyes may be on Bitcoin and its surge above the $ 15,000 level. However, the recent development update regarding Ethereum may see some capital pouring back into Ethereum and its wider ecosystem. This does not mean that Bitcoin is actively being sold, but the trend of blocking Bitcoin on the Ethereum network can accelerate and apply to oversold DeFi and DEX tokens like Uniswap. “
On Ether’s historical tendency to rise after a Bitcoin rally, crypto traders have said that ETH could soon rise against Bitcoin. Michaël van de Poppe, a full-time trader on the Amsterdam Stock Exchange, said the ETH / BTC trading pair had reached an important area of support. Van de Poppe explained, “It took forever, but ETH got to the 0.026 range that we talked about a lot.” This is a big support zone for ETH.
The release of Ethereum 2.0 plays a role
The release of Ethereum 2.0 in the near future is critical to Ether’s momentum, as the network upgrade would significantly increase ETH’s transaction capacity. This would allow the new DeFi cycle to have a long lifespan if it did occur as it would reduce the risk of network congestion and high transaction fees. Since Ethereum 2.0 supports staking and allows users to assign 32 ETH to the network in exchange for incentives, this could reduce the circulating supply of ETH across exchanges.
According to the blog post by Ethereum co-founder Vitalik Buterin entitled “Why Proof of Stake”, the use of Ethereum will reward users with a return of 15%. Since the return is based on the holdings of ETH and not on the US dollar, the incentives to use increase with the price of ETH. So analysts expect more investors to accumulate ETH to put it, which would ease the pressure on the sell side.
The market and community have been expecting Ethereum 2.0 for several years, but challenges have delayed its release. For Ethereum 2.0, due to the complexity of the upgrade, several test networks with an immense test effort were required. Developers behind Ethereum 2.0 wrote on the Github page of the Medalla testnet:
“Before such a mainnet can be started, we need test networks that mimic the mainnet conditions as closely as possible. This requires that stable, long-term and permanent test networks are set up that are supported not just by one client but by several clients, ideally all clients. “
The mood around Ether has become increasingly optimistic as the launch of Ethereum 2.0 coincides with various cheap catalysts for ETH. A pseudonymous cryptocurrency trader called “Loma” indicated that Ethereum 2.0 will take about $ 1 billion off the market. As supply plummets, Bitcoin’s rally is bringing significant capital back into cryptocurrency as the ETH / BTC trading pair forms a bottom formation.
The Ethereum 2.0 excitement has increased after Buterin’s personal wallet sent 3,200 ETH to an Ethereum 2.0 deposit address. According to the official Ethereum 2.0 release notes from coordinator Danny Ryan, the Ethereum 2.0 upgrade can begin if there are 16,384 deposits from 32 ETH seven days before December 1st. After years of research, testing, and implementation, there is finally a tough date for its release.
The Ethereum 2.0 confluence is approaching, which would benefit the entire Ethereum and DeFi ecosystem in terms of scaling, and the strength of the ETH / BTC trading pair makes a rally in November and December more likely. There’s also narration that ETH rose significantly to its all-time high of $ 1,419 in January 2018, almost a month after BTC hit its record high of $ 20,000.